China’s economy grew 6.9 percent in 2017, the fastest since 2015 despite policymakers tightening credit and introducing regulations to cool demand in the property market. It is expected that growth in China’s construction market will ease and settle to a more sustainable pace over the next few years.

The biggest challenges local developers and contractors face will not be market demand, but ever more stringent environmental regulations, resulting from concerns over increasing pollution, and labour shortages due to the ageing population. To overcome these challenges the government is vigorously promoting new construction techniques to improve efficiency, reduce pollution and reduce the labour intensiveness of the industry.

The government clearly flagged up in the nation’s 13th Five-Year Plan, covering economic and social development from 2016 to 2020, the need to promote prefabrication as part of the construction industrialisation and green building action plan. It has proposed that in ten years, 30 percent of newly-built buildings will be prefabricated.

The change is not expected to be easy. Except for a few pilot projects, prefabricated construction in China is embryonic and the policies supporting it remain unclear. There is a low acceptance of prefabricated building, technology is under-developed and there are limits on the skilled technicians available. Furthermore, the architectural design supporting prefabricated construction is undeveloped and production cost are higher than traditional construction in China as economies of scale remain low and the production process slow.

Ultimately the economics will be a key concern among the various stakeholders in the construction process and the level of success economically will have a significant influence on the uptake of prefabrication in construction. To address this issue, governments are looking at financial incentives, including preferential policies on land bidding, credit support, transportation and subsidies.

Construction industrialization, modularisation and prefabrication is considerably lower in China than in developed countries. If China is to respond to more stringent environmental regulations enforced by government, there needs to be radical change to construction supply chains throughout China.

However, the new regulations open a major new space within the Chinese construction sector for international players. It is predicted that by 2020 there will be more than 300 Chinese prefabricated-component factories serving China’s construction sector, with the prefabricated buildings market and steel structure market worth around USD300bn Chinese Yuan and USD50bn respectively.

This content is part of the International construction market survey 2018